According to the World Bank, macroeconomic concerns including those brought on by the redesign of the Naira, issues with foreign money shortages, and the country’s continuously high inflation rate have slowed Nigeria’s growth pace.
This information was provided in its Global Economic Prospects for Sub-Saharan Africa (SSA) report for June 2023, which also noted that Angola and South Africa also experienced sluggish growth. These three nations have the largest SSA economies, and their growth slowed to 2.8 percent in 2022.
The report also noted that high and persistent inflation, further tightening of global financial conditions, domestic policy tightening, and resurgences of violence and social unrest in some countries have all undermined the fragile and incomplete recoveries from earlier adverse economic and climatic shocks in many countries.
According to the report, chronically high inflation, currency shortages, and shortages of banknotes brought on by currency redesign caused the post-pandemic recovery in Nigeria’s non-oil sector to cool off earlier this year.
In addition, it said that stagnating oil production and decreasing energy prices had further slowed the growing pace.
The Bretton Woods Institutions predict that growth in SSA will continue to slow, reaching 3.2 percent in 2023 before increasing to 3.9 percent in 2024.
“Growth in Nigeria is expected to remain barely above the population growth—far slower than needed to make significant inroads into mitigating extreme poverty,” it continued.
The Bank stated that the average per capita income growth in 2023–2024 for the three largest economies in SSA is not expected to exceed 0.5 percent, making the prospects for poverty reduction in the region bleak. Nearly 40% of SSA’s population currently lives in countries with lower per capita incomes than in 2019.
The World Bank also noted that the downgraded outlooks go beyond the major regional economies, with higher living expenses limiting individual consumption and stricter regulations preventing investment inflow.
“Growth in SSA continued to decelerate earlier this year owing to various country-specific challenges and heightened external economic headwinds; worsened domestic vulnerabilities together with tight global financial conditions and weak global growth are expected to keep recoveries subdued,” it said.
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The World Bank Group’s president, Ajay Banga, stated that employment is the most reliable means to eradicate poverty and promote prosperity; yet, slower growth makes it far more difficult to create jobs.
The World Bank predicts that growth will slow down globally, from 3.1 percent in 2022 to 2.1 percent in 2023.
According to World Bank Group Senior Vice President and Chief Economist Indermit Gill. Higher interest rates are contributing to the debt pressures already present in emerging markets and developing economies, where budgetary inadequacies have already contributed to the debt distress of many low-income nations.
The financing requirements to achieve the sustainable development goals are far greater than even the most optimistic projections of private investment, according to Indermit. In 2023, trade will grow at less than a third of its pace in the years prior to the pandemic.
In a similar vein, Ayhan Kose, Deputy Chief Economist, World Bank Group, stated that many developing economies are coping with weak growth, persistently high inflation, and record levels of debt amid the possibility of more widespread spillovers from renewed financial stress in advanced economies, which could make things even worse for them.
In order to avert financial contagion and lessen short-term domestic risks, Kose advised policymakers in these economies to take quick action.